Texas Legislation Looks to Enhance Captive Regulatory Environment

In 2013, Texas enacted legislation authorizing captive insurance companies to be domiciled in Texas for the first time, with the first Texas captive becoming licensed on March 17, 2014. Now, Texas lawmakers have proposed legislation, Senate Bill 667, to enhance an already favorable regulatory environment for Texas-licensed captive companies and to encourage the many Texas businesses with captive insurers in other jurisdictions to re-domesticate to Texas.

Specifically, the proposed legislation would permit Texas captives to pool risk with other captives subject to approval by the Texas Department of Insurance (“TDI”); authorize a Texas captive to accept risks from and cede risks to or take credit for reserves on risks ceded to certain risk pools and affiliated captives, subject to approval by TDI; and clarify the requirements for dividends to be paid to owners of captive insurers. Identical companion legislation, House Bill 1700, is pending in the House Insurance Committee. The legislation needs to pass both the full House and Senate before going to the Governor for signature. The Texas Captive Insurance Association has voiced its support for the legislation.

According to the TDI 2014 Annual Report, 11 captive insurers are licensed in Texas and 180 captive managers are registered.